Portfolios are a way to group items so that they can be viewed in context with one another and managed as a group. A portfolio of stocks, for instance, implies more than just a bunch of individual stocks. The term portfolio denotes that the stocks are viewed as a group for a common purpose.

The term portfolio management has also been applied to the way companies should view their investment decisions. No matter how high your profits are, you still have only a finite amount of resources to invest in your business. You must apply these resources to the support and operation of your current business processes, as well as invest them in new capabilities. Let’s examine gathering metrics and feedback to get an indication of how effective and efficient you are and how successfully you’re managing the portfolio.

Portfolio management series

This is the fifth and final article in our series on portfolio management. Also see:
“Use portfolio management to maximize IT spending”
“Plan and prioritize work within the context of an entire portfolio”
“Manage the entire year’s work with a portfolio”
“How to manage your work portfolio when business changes affect your plan”

You need to measure two levels within the portfolio. First, determine how successfully you’re delivering the underlying projects and support within the portfolio. Second, measure how well you’re planning, managing, and controlling the work at the portfolio level. For instance, you could be doing an excellent job of scheduling and managing the portfolio, but there could be major problems with actually delivering the underlying projects and support work. To be totally effective, you must be doing well at both levels.

Detailed feedback
You must receive accurate and timely feedback to effectively manage the current work within the portfolio. Normally, the mechanism for gathering this feedback is the status reporting process. There are many ways to report and collect this feedback, including status report documents, e-mail updates, and voice mail. The status of all the underlying work is typically summarized at the portfolio level. One effective technique is to have one or two lines of information for each project and support area within the portfolio. Each project and support area may marked with a color that indicates whether the work is okay (green), at risk (yellow), or in trouble (red). Establish criteria to categorize each initiative within the color scheme. You also need the ability to drill down for more information on any initiative.

Status reports allow you to track work while it’s in progress. When projects are complete, you should also collect information on how successful they were. Projects should have a scorecard that describes their success criteria, which typically include cost, schedule, and quality targets. After the project is complete, the team should collect the appropriate information to determine whether they were successful. The results are then summarized at the portfolio level.

The portfolio-level summary can be in two forms. First, you can report the detailed project targets and actual results from each scorecard. This can be especially valuable if all projects in the portfolio follow a standard and consistent scorecard format. An alternative is that each team reports only whether they successfully met their scorecard criteria. For instance, you may have 10 projects that were completed this month. Eight of them successfully met their scorecard criteria for budget, nine met their scorecard criteria for deadline, and seven met their scorecard criteria for quality. This allows you to make some general conclusions at the portfolio level without having to know the exact detailed scorecard criteria of each project.

Likewise, the support teams provide similar feedback. The support teams should have success criteria in terms of service levels, availability, quality, etc. Since the support work does not technically “end,” their data collection takes place quarterly and is similarly summarized at the portfolio level.

Portfolio-level feedback
You also need to collect feedback information at the portfolio level. The portfolio should have objectives that describe the criteria and targets for success. For instance, you might have a portfolio objective that 80 percent of all projects will meet their budget and deadline targets. The input for these portfolio objectives will come from summarizing the results of the projects and support work within the portfolio.

The second source of portfolio feedback is through all the major client stakeholders. This feedback can come from a combination of formal surveys, group meetings, and one-on-one discussions. The clients should provide feedback in areas such as how effectively the planning and prioritization processes were, how effectively the portfolio is being managed, the active level of communication, the business knowledge within the portfolio, and how easy the portfolio management team is to work with.

Portfolio dashboard
Once you determine what type of feedback you need to receive, you can design a portfolio dashboard to display the feedback. Typically, the dashboard provides a summary of all of the key metrics feedback in an easy-to-read and graphical format. The managers of the portfolio should be able to see quickly whether there are problems or risk areas and then drill down to find the details.

Process improvements
The reasons you gather metrics and feedback are to determine whether you’re meeting your objectives and to improve your processes. For instance, let’s say you have an objective that 80 percent of all projects will meet their budget and deadline criteria. If your monthly metrics show that you’re meeting the criteria only 60 percent of the time, you’re failing. Further investigation should help determine the causes, and you should take corrective actions to improve these numbers. Likewise, if a quarterly survey reveals that your clients rate you low on your communication skills, you have time to improve the communication channels to ensure that the clients are getting the information they desire.

Some groups have great processes for planning and managing the portfolio of work, but they don’t do a good job of measuring how effective and efficient they are. They make the mistake of thinking that following a process means they’re doing everything right. In fact, they may be. However, you can’t tell for sure unless you measure. You need to measure and summarize the effectiveness of the underlying work within the portfolio, as well as the effectiveness of the portfolio management processes themselves. Gathering the feedback allows you to make corrective actions to ensure that the entire portfolio, including the management team, is successfully meeting the needs of your clients.